Course On Professionalism

1. Course On Professionalism Actuarial Organizations And Qualification Standards

2. Discussion Topics • Professional Actuarial Organizations • Statements of Principles & Standards of Practice • Pre-work Review • U.S. Qualification Requirements (including Continuing Education) • CAS Continuing Education Requirements • Applicability Guidelines

3. Casualty Actuarial Society The Purpose of the Casualty Actuarial Society is: to advance the body of knowledge of actuarial science applied to general insurance, including property, casualty and similar risk exposures To establish and maintain standards of qualification for membership To promote and maintain high standards of conduct and competence for the members To increase the awareness of actuarial science 3

4. American Academy Of Actuaries • The Academy is a professional membership, government information, and public relations organization for all actuaries practicing in the United States, regardless of specialty • The Academy establishes qualification standards for making public statements of actuarial opinion • Professional standards of practice and discipline procedures are the responsibility of the Actuarial Standards Board (ASB) and the Actuarial Board for Counseling and Discipline (ABCD), respectively, both independent entities within the Academy • In Canada, the CIA serves this role

5. Actuarial Standards Board The ASB’s objectives are: • Direct and manage the development of actuarial standards of practiceby its operating committees in all areas of actuarial practice • Expose and promulgateactuarial standards of practicewithin its sole discretion and pursuant to such procedures it deems appropriate, in all areas of actuarial practice • Provide continuous review of existing standards of practiceand determine whether they are in need of amendment, alteration, expansion, or elimination

6. Relationships Between Standards And Statements CASUALTY ACTUARIAL SOCIETY AMERICAN ACADEMY OF ACTUARIES HAS FORMED PROMULGATES ACTUARIAL STANDARDS BOARD STATEMENTS OF PRINCIPLES ARE USED BY PROMULGATES STANDARDS OF PRACTICE

7. Statements Of Principle Vs. Standards Of Practice • Statement of Principle: • A general or fundamental rule or truth on which others are based • Principlesare expected to be relatively constant • Standards of Practice: • Define the appropriate actuarial practices • Standards are expected to change over time in order to remain current

8. Focus Of Standards • Indicate how fundamental concepts & methodological principles should be applied in a variety of circumstances • Five “Areas of Practice” within ASB, each with its own operating sub-committee, charged with developing & reviewing appropriate Actuarial Standard of Practice (ASOP): • Casualty • Health • Life • Pension • General

9. Introduction to ASOP’sVideo

10. Standards Of Practice • Standards of professional performance and behavior • Developed to meet the expectations of users of the professional services • Provide guidance for • Dealing with commonly encountered problems • Handling new problems & non-routine situations • Ensure the high quality of professional services • Applicable only to practice in the United States

11. Code Of Conduct Precept 1* • “An actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession.” • Violations may include: • Intentionally low-balling an estimate • Performing services outside of your area of expertise • Failure to meet the CE requirements • Not seeking peer review when necessary • Criminal activities * items marked with a “*” are also applicable to CAS candidates through the Candidate Code of Conduct

12. Code Of Conduct Precepts • Precept 2 – requires that prior to performing actuarial services you meet the qualification standards – Experience and Continuing Ed requirements. • Precept 3 –requires that you are familiar with and appropriately apply the requirements of the ASOPs • Precept 4 -relates to appropriate communication including using terminology that is appropriate to the circumstances and the audience. • Precept 5 - Must identify the Principals (who you work for) • Precept 6 –addresses disclosure of compensation. • Precept 7 Addresses disclosing a conflict of interest and expressly having parties agree that the actuary may perform the actuarial services if an actual or apparent conflict exists • Precept 8 An actuary who performs actuarial services shall take steps to ensure that such services are not used to misleadother parties. 12

13. Code Of Conduct Precepts • Precept 9* - Actuary may not violate a confidentiality agreement unless required to do so by law. • Precept 10* - An actuary shall perform services with courtesy and professionalism, respect and cooperate with others in the principal’s interest. • Precept 11* -An actuary shall not engage in false advertising. • Precept 12* - Relates to using membership titles and designations. • Precept 13 – relates to a known violation of the code of conduct. You are advised to discuss the situation with the other actuary and attempt to resolve the violation. Otherwise the actuary must disclose the violation to the counseling body (ex: A.B.C.D. or C.I.A.) unless contrary to law or a confidentiality agreement (except in Canada). • Precept 14* - requires you to cooperate with and respond to the A.B.C.D. or other counseling/disciplinary body

14. Statement Of Principles • P&C Loss and Loss Adjustment Expense Reserves • P&C Insurance Ratemaking • P&C Valuations • Risk Classification

15. Actuarial Standards Of Practice(Covered In e-modules Prior To Course) • ASOP 1 (Introductory Standard of Practice) • ASOP 17 (Expert Testimony by Actuaries) • ASOP 19 (Actuarial Appraisals) • ASOP 23 (Data Quality) • ASOP 41 (Actuarial Communication) • ASOP 43 (P/C Unpaid Claim Estimate) • Ratemaking ASOPs 12, 13, 25, 29, 30, 38, and 39

16. American Academy Of Actuaries’Qualification Standards And Continuing Education Requirements As Amended And Approved By The Academy’s Board Of Directors Effective January 1, 2008

17. Purpose • Precept 2 of the Code of Conduct requires members to perform Actuarial Services only when such member “is qualified to do so on the basis of basic and continuing education and experience and only when the Actuary satisfies applicable qualification standards” • This document outlines the applicable qualification standards and continuing education requirements

18. Scope • Applies to all actuaries who are members of the Casualty Actuarial Society (CAS), Society of Actuaries (SOA), the Conference of Consulting Actuaries (CCA), and the American Society of Pension Professionals and Actuaries (ASPPA), or whether or not they are also members of the American Academy of Actuaries, as well as other Academy members • Qualification standards apply to CAS members by virtue of the Code of Professional Conduct, which requires that actuaries observe applicable qualification standards that have been promulgated by recognized actuarial organization for the jurisdiction in which the actuary renders actuarial services

19. Scope(Continued) • Applies to actuaries who issue “Statements of Actuarial Opinion” (SAO’s) • Definition of SAO has been expanded to include virtually any actuarial work done by a practicing actuary • This applies to you if you work in the U.S.!

20. Overview Of U.S. Qualification Standards • Qualification standards are grouped into two broad categories • General Qualification Standards • Specific Qualification Standards • General Qualification Standards apply to all members • Specific Qualification Standards depend on the type of SAO being issued

21. U.S. General Qualification Standards Three components • Basic Education • Experience Requirement • Continuing Education

22. U.S. GeneralQualification Standard(Continued) Basic Education • Be a member of the Academy, a Fellow or Associate of the CAS or SOA, a Fellow of the CCA, a Member or Fellow of the ASPPA, or a fully qualified member of any IAA-member organization • Be fully knowledgeable, through examination or documented professional development of all applicable laws pertaining to the SAO being issued

23. U.S. GeneralQualification Standard(Continued) Experience Requirement Have three years of responsible actuarial work, which is defined as work that requires knowledge and skill in solving actuarial problems

24. U.S. GeneralQualification Standard(Continued) Continuing Education • 30 credit hours of relevant continuing education must be earned in the calendar year preceding the year in which an SAO is issued • “Credit hour” defined as 50 minutes • Can be composed or either “organized activities” or other activities • At least 6 of the 30 hours must be “organized activities” • At least 3 of the 30 hours must relate to professionalism topics (may or may not be “organized”) • No more than 3 hours can relate to general business courses and educational material

25. U.S. Continuing Education Requirements Continuing Education is “relevant” if… • It broadens or deepens an actuary’s understanding of one or more aspects of the work an actuary does • The material expands an actuary’s knowledge of practice in related disciplines • It facilitates an actuary’s entry into a new area of practice

26. U.S. Continuing Education Requirements “Organized” Activities • Activities can be “organized” or “other” • A minimum of 6 of the required 30 credit hours must consist of “organized” activities • “Organized” activities include conferences, seminars, web casts, online courses, or committee work • “Organized” activities must involve interaction with actuaries or professionals working for different organizations • In-house meeting or seminars do not count as “organized” unless outside speakers are used

27. U.S. Continuing Education Requirements(Continued) Other Activities Other activities include reading actuarial literature, statutes or regulations, other books, papers or articles on relevant technical or professional topics; listening to tapes of actuarial meetings or seminars; in-house meetings, studying for actuarial exams; or preparing to speak or lead a discussion at a continuing education activity

28. U.S. Specific Qualification Standard • Applies to actuaries who issue specific types of Statements of Actuarial Opinions • Currently applies to actuaries who issue SAO’s in conjunction with: • NAIC Life and A&H Annual Statement • NAIC Property and Casualty Annual Statement • NAIC Health Annual Statement

29. U.S. Specific Qualification Standard (Contd.) Three Components • Basic Education • Experience Requirement • Continuing Education

30. U.S. Specific Qualification Standard (Contd.) Basic Education • Must meet the requirements for general qualification PLUS • Obtain specific knowledge relating to the relevant SAO through relevant examinations given by an actuarial organization or demonstrate proof of required knowledge by obtaining a signed statement from another actuary qualified to issue the same SAO

31. U.S. Specific Qualification Standard (Contd.) Experience Requirement Have three years of responsible actuarial work relevant to the SAO being issued. Work must have been performed under review by an actuary who was qualified to issue the same SAO at the time the review took place based on standards in effect at that time

32. U.S. Specific Qualification Standard (Contd.) Continuing Education • 15 credit hours of continuing education relevant to the specific SAO being issued must be earned in the calendar year preceding the year in which an SAO is issued • “Credit hour” defined as 50 minutes • A minimum of 6 of the 15 hours must be obtained through interaction with outside actuaries or other professionals • Hours that satisfy the specific qualification standard can also be applied to the general qualification standard requirements

33. Types Of SAO’s • Standard includes a detailed list of the types of actuarial communications that would be regarding as an SAO to which the qualification standards apply • These include virtually all types of actuarial communications, including loss reserve opinions, ratemaking opinions, expert testimony, supporting actuarial reports, rate filings, etc.

34. U.S. Recordkeeping • No specific method of recordkeeping required • Actuaries are expected to keep their own documentation and to keep it up to date • Sample recordkeeping forms provided but are not required to be used • Documentation should be kept for six years

35. “Grace” Period • Typically, continuing education credit hours must be earned by December 31 of the year prior to the calendar year in which the relevant SAO is being issued • The new standard includes a “grace” period in which an actuary may earn additional credit hours to satisfy the qualification standards in the beginning of the current year as long as such credit hours are earned prior to the SAO being issued • These credit hours do not carry forward to thecurrent year requirements

36. Does This Apply To Me? • New ACAS’s are subject to the same requirements as FCAS’s. • Once an actuary becomes a member of the CAS, he or she must meet the basic education and experience requirements before issuing a statement of actuarial opinion. • Hour requirements must be met IN FULL for newly credentialed actuaries. There is no proration of hours depending on the calendar year.

37. What About Study Time And This Course? Study time (exams) may count towards the “other activities” requirement. Any excess study hours can be rolled for “other activities” hours in the following year. However study time alone won’t guarantee compliance. Actuaries must have six hours from “organized activities” and three continuing education hours on professionalism topics. This seminar counts towards both organized activities and the hours dedicated to professionalism topics, provided that you attain your ACAS this year or next.

38. Casualty Actuarial Society Continuing Education (CE) Policy

39. Why the CAS Continuing Education (CE) Policy? • At its May 3, 2009 meeting, the CAS Board approved a motion that all CAS members, with limited exceptions, should be subject to continuing education requirements. • While national CE standards exist in many jurisdictions, such as the U.S. and Canada, some CAS members practice where no national CE standards exist, and some members may have been exempt from their local national standard • Example: Actuaries practicing in Bermuda

40. CAS Continuing Education (CE) Policy • Approved May, 2010 • Effective for actuarial services rendered in 2012 • Applies to all ACAS and FCAS members who provide Actuarial Services

41. CAS Continuing Education (CE) Policy • Meet requirements by: • Satisfying the continuing education requirements established by a national actuarial organization recognized by the Policy; (practice in U.S. :the AAA); OR • Meet requirements outlined in the Alternative Compliance Provisions described in Section C of the CAS Continuing Education Policy (would not necessarily be compliant with Academy of Actuaries)

42. CAS CE: What Changes? • The biggest change for most CAS members was the need to certify compliance annually, and have their log of continuing education activity available for potential audit by the CAS. • CAS members must certify that they are Compliant, Not Currently Providing Actuarial Services, or Non-Compliant • Non-compliant may be subject to administrative and other penalties.

43. Alternative Compliance Provisions(Section C of the CAS CE Policy) • Some different rules/definitions, compared to AAA policy, but otherwise very similar: • 60 hours over two years instead of 30 hours over one year • Structured hours vs. organized activities (not defined exactly the same)

44. Applicability Guidelines Revised December, 2009

45. Applicability Guidelines • It is important for practicing actuaries to be aware of the applicability of different ASOPs to the various tasks they perform • The Council of Professionalism of the American Academy of Actuaries arranged for the development of these guidelines to provide nonauthoritative guidance to actuaries as to which actuarial standards might apply to them as they perform various assignments in their roles as actuaries • The guidelines are meant to encourage the professionalism of actuaries but are not intended to be exhaustive • Ultimately, it remains the actuary’s responsibility to identify the standard(s) that apply to each assignment, and to appropriately apply such requirements when performingthat assignment

46. Applicability Guidelines(Continued) • The guidelines are updated periodically (most recently in December 2009) • The actuary is responsible to keep current with changes to the ASOPs and to ensure that professional services rendered satisfy the current version of each ASOP that is applicable to the services • The Code of Professional Conduct requires that actuarial services performed by member actuaries satisfy applicable standards of practice. However, the applicability guidelines are not standards of practice, they were not promulgated by the Actuarial Standards Board, and are not binding on any actuary

47. Applicability Guidelines(Continued) • The guidelines provide a list of the tasks normally performed by actuaries in the different practice areas, and a list of ASOPs that are usually applicable to each task • List of tasks: • Appraisals • Expert Advice, Witness, and/or Testimony • Financial Analysis, Projections, and Reporting • Miscellaneous • Product Development/Ratemaking/Pricing • Regulatory Issues/Filings • Reinsurance • Reserving

48. Applicability Guidelines(Example)